Excerpt from the Dayton Daily News
Ohio’s largest public pension system voted this week to reduce cost of living benefits for current and future retirees — a move that requires legislative changes.
The Ohio Public Employees Retirement System voted 8-2 to ask lawmakers to allow the pension fund to freeze the cost of living adjustment in 2022 and 2023 for all retirees and delay the COLA for two years for all new retirees.
Changes in pension COLAs is a big lever to straighten out a system’s finances. Likewise, retirees rely on COLAs over the long haul to preserve their buying power and keep pace with inflation.
The proposed changes to the COLA are designed to wipe out $3.44 billion of $24 billion in unfunded liabilities facing OPERS. Investment gains and losses are recognized over multiple years in a “smoothing” method used by large pension systems. The pension fund lost 3.38 percent on its investments in 2018 — losses that have yet to be fully recognized.
“We are just being proactive and trying to be good fiduciaries of the system,” said OPERS spokesman Mike Pramik. Ohio law requires public pension funds to have enough assets on hand to meet their liabilities within a 30 year window. If OPERS doesn’t take action, the system would be out of compliance with that 30 year requirement.
The OPERS cost of living allowance depends on when the worker retired. For those who retired before January 2013, it’s 3 percent each year. For those who retired after that, the COLA is tied to inflation and is expected to be 1.4 percent for 2020.
